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METALS-Nickel hits two-month low on improving supply and strong dollar

* GRAPHIC-2019 asset returns: (Updates with closing prices)

LONDON, April 23 (Reuters) - Nickel prices hit a two-month low on Tuesday on signs of rising supply while the wider market also fell on a stronger dollar and uncertainty about the Chinese economy.

Data showed the deficit in the global nickel market for the first two months of the year narrowed sharply to 5,700 tonnes, down from 24,400 tonnes in the same period last year.

“I can see why nickel is under a bit of pressure. The data is still showing a deficit, but it’s well below what we’ve seen over the last couple of years. And nickel ore prices are down to the lowest levels in over a year,” said Colin Hamilton, director of commodities research at BMO Capital in London.

“Chinese NPI (nickel pig iron) production is up this year so we are getting decent amounts of supply growth coming through.”

Benchmark nickel on the London Metal Exchange (LME) was down 2.1 percent at $12,390 a tonne by 1600 GMT, the lowest since Feb. 19.

Nickel has shed 8 percent since touching a six-month peak in early March but is still the best performing LME metal so far this year with a gain of 18 percent.

The LME reopened on Tuesday after the long Easter weekend.

* CHINESE STIMULUS: Metals markets felt the chill from Chinese shares, which on Monday extended sharp declines from the previous session on the possibility that Beijing could slow the pace of policy easing after a stronger than expected economic performance.

“People are worried that the accommodative policy may face an end,” said Shanghai-based copper analyst He Tianyu of metals consultants CRU.

* DOLLAR: The dollar index touched its highest since June 2017. A stronger dollar makes metals priced in the greenback more expensive for buyers using other currencies.

* CHINA SCRAP: China’s scrap copper imports in March fell 54 percent from a year ago to 100,000 tonnes, the second-lowest monthly figure in records since June 2014.

Three-month LME copper shed 1.1 percent to trade at $6,407 a tonne in closing open-outcry trading.

* ALUMINIUM: LME aluminium found support after China’s environment ministry reprimanded provincial officials in Shandong, the country’s biggest aluminium-producing province, for failing to curb the growth of highly polluting aluminium output. Aluminium edged down 0.1 percent to trade at $1,866 a tonne in closing rings after touching its highest in more than two weeks at $1,886.

* ALUMINIUM OUTPUT: Global primary aluminium output rose to 5.414 million tonnes in March from a revised 4.916 million tonnes in February, data showed.

* ZINC SPREADS: The premium of cash zinc over the three-month contract CMZN0-3 was last at $100 a tonne, close to a four-month high, showing low availability of supplies in LME-approved warehouses.

* PRICES: LME zinc gave up 0.7 percent to close at $2,748 a tonne, lead dropped 1.2 percent to $1,917 and tin fell 1.7 percent to $19,890, its weakest since Jan. 8.

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Additional reporting by Mai Nguyen in Singapore; Editing by Mark Potter and David Goodman